Thursday, March 1, 2012

"It's a Gas, It's a Gas, It's a Gas Gas Gas (Taxes)!"---Gas taxes and consumption from around the world...

Gas prices vary across countries and continents. Much of the difference is in the level of taxation.  The chart below (From The Conversable Economist) shows, in US dollars, the amount levied on a gallon of gas in various developed countries.

There are many reasons why you might want to put high taxes on gasoline.  Economic theory suggests if you tax something you get less of it or at least less consumption of it.  The chart below shows the relationship between the gallons consumed per person (vertical axis) and the retail price of gasoline, taxes included (horizontal axis).   The labels are flipped relative to the conventional Demand Curve. There seems to be a pretty tight relationship between price and quantity demanded!

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